Send Convertible Note Agreement Template

Aug 6th, 2022
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How to Send Convertible Note Agreement Template

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In this tutorial, Scott from Cruise Consulting discusses a sample convertible note agreement. He emphasizes the importance of using a template from a law firm to document deals properly. Key aspects highlighted include the amount of the note, the repayment term, and the valuation cap, which are crucial components of the agreement. Additionally, the video covers the conversion terms, noting that institutional venture capitalists usually prefer convertible notes that convert into preferred shares. Scott encourages viewers to review the template for educational purposes, as it provides valuable insights into the structure and terms of convertible notes.

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Convertible notes are a type of loan issued by startups that convert into equity once a triggering event occurs. Usually, the triggering event will be the startups next round of financing that exceeds an agreed-upon minimum threshold, i.e. qualified financing round.
Steps / Procedure and documents required to issue Convertible notes in India: Decide the amount to be raised and the terms of conversion of convertible notes. Prepare a convertible note agreement. Pass a board resolution to approve the convertible note agreement. Pass the EOGM to approve the issue of notes.
EXAMPLE: A startup company with 1,000,000 shares of common stock closes a seed funding round of $1,000,000 in the form of a convertible note, with a valuation cap of $5,000,000 pre-money valuation on the next round of financing. For simplicity, assume the note carries a 0% interest rate.
Convertible notes are usually structured as a single agreement called the note purchasing agreement. This covers all of the financing terms. Promissory notes are then issued to individual investors with the date and amount of their investment.
Steps / Procedure and documents required to issue Convertible notes in India: Decide the amount to be raised and the terms of conversion of convertible notes. Prepare a convertible note agreement. Pass a board resolution to approve the convertible note agreement. Pass the EOGM to approve the issue of notes.
Although it is customary to forego a term sheet, in some cases it may be required if the parties need to negotiate certain terms. It can be advantageous to use a term sheet for the company to easily summarize the terms of the notes for potential other investors purchasing a convertible note.
Convertible notes are usually structured as a single agreement called the note purchasing agreement. This covers all of the financing terms. Promissory notes are then issued to individual investors with the date and amount of their investment.
Convertible Note - Reporting Requirements FIRC and KYC of the non-resident investor. Name and address of the investor and AD bank. Copy of MOA / AOA. Certificate of Incorporation. Startup Registration Certificate. Certificate from Practising Company Secretary.

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